When our government says “more supply” is the solution to high home prices, this is what they mean In red the number of homes ON needs to build for housing to be affordable in 10 years, according to CMHC In blue the actual number of homes ON has built each year 1/
So why do we need to build so many homes? Because our politicians wanted Canada’s population to grow at a much faster rate than in recent history but didn’t care about building homes for people So, Ontario has to catch up 2/
Canada’s annual immigration target over the next few years is over 400K, well above the roughly 250K since 2000 And our growth in non-permanent residents is also well above historical trends 3/
But as CMHC observes, increasing immigration numbers is easy, fixing housing supply is very hard 4/
I don’t know what a correct immigration target is, but one thing is plainly obvious When policy makers decide to set that level well above the level of housing we are building and can build in the short term, they are deciding to drive up home prices and rents 5/
It's a decision to drive up home prices because as CMHC correctly points out, building more homes is incredibly hard and the supply of housing cannot adjust as quickly as demand Not to mention our construction industry doesn't have the capacity to build 4X as many homes 6/
For this reason, it’s hard for me to join the camp of housing bears who think we are at the start of a long-term housing crash like the 1990s The 1980s bubble was also partly driven by a big immigration and non-permanent resident population boom 7/
But in the 1990s our population growth rate fell dramatically from the late 80s peak, something I don’t expect to happen this time around As long as our population is growing faster than our ability to build homes, there will be upward pressure on prices and rents 8/
To be clear, I don’t know when we’ll hit a floor on prices, and I’m not expecting we’ll see double digit appreciation in house prices any time soon But 5% appreciation on a leveraged investment is good enough for me, especially when rental demand is as strong as it is /
